The Texas Supreme Court has refused to hear the challenge of the losing Defendants to a jury verdict in a securities fraud trial in favor of Prosper residents Scott and Kristi Fisher.
On August 5, 2019, a 3-judge panel of the 5th District Court of Appeals, in Dallas, issued its unanimous Opinion affirming the June 29, 2017 judgment of the 219th District Court of Collin County, Texas, based upon the verdict of a civil jury in favor of Scott and Kristi Fisher, husband and wife from Prosper, Texas, and parents of 4 school-age children. The jury found the principal Defendant, Stephen F. Perkins, and 3 Perkins controlled business entities, to have been members of a civil conspiracy to engage in fraud and intentional securities law violations of Texas’ “Blue Sky” laws in the sale of an unregistered limited partnership investment interest to Mr. and Mrs. Fisher in a newly-constructed self-storage facility located near their home on Preston Road in Prosper, Texas.
The facts heard by the jury at trial were:
Kristi Fisher: Kristi Fisher was raised in Iowa. She met her husband, Scott, in 1993, while both worked at Texas Instruments. She obtained her bachelor’s degree in Political Science from Iowa State in May 1990. Kristi became a working mother after she and Scott married in 1998, working in products distribution for numerous companies (M & M Mars, Malt-O-Meal, and Chicken of the Sea). She and Scott had 4 children, ages 17, 15, 12 and 9 at trial. The Fisher home was in Prosper, TX.
She first heard about PS Royal Services Group, LP (the Self-Storage facility) in spring 2010. The Self-Storage facility was located on Preston Road, not far from their home “maybe half a block” away. She noticed a “For Sale” sign at the facility “leaning against the brick wall of the storage unit,” containing the name of Larry Robbins. The thing that caught her eye was she perceived “an opportunity to grow with Prosper as it was growing, and have an income, a passive income, to help with the kids– the education.” She stated the “For Sale” sign included information that Robbins was with Capstone Commercial. She decided to telephone Robbins and ask the details of the property “for sale.”
Robbins told her the Self-Storage facility was not for sale, and his listing was for the adjacent land, owned by the same owner (Steve Perkins) with whom he was a business partner, but he knew Mr. Perkins was looking for investors regarding the Self-Storage facility. Robbins offered to speak to Perkins and determine whether he would like to meet with Kristi and her husband about “further investment opportunities.” A couple of weeks later, Robbins arranged a meeting of himself, Perkins and the Fisher’s, at the Starbucks in Plano. The Fishers and Robbins showed up first, and discussed for a few minutes his relationship with Perkins, whom he described as a “standup guy,” that owned numerous businesses, in which Robbins was himself an investor with Perkins. Robbins assured them an investment in the Self-Storage facility would be “just a great opportunity.”
Perkins arrived and began describing his businesses, talking about his balance sheet of over $50 million, with 38 active businesses, all “rolling in cash.” They talked about having the Fisher’s become investment partners in the Self-Storage facility, and they arranged to get together at a future meeting, which took place weeks later.
In the 2nd meeting, Perkins brought “a prospectus,” described by Kristi as “that 50 pages of glory business plan,” showed it to them but did not leave a copy, offering to email it to them which he later did on June 15, 2010. The “prospectus” was received by the Fishers by email and was admitted an Exhibit.
The “prospectus or business plan” was approximately 50 pages, and full of “impressive material.” It described a new storage facility getting ready to open and which was almost complete, with the exception of the center climate-controled area. There was “a prospective cash flow starting in 2011.” It projected a 2011 “net income” of $84,562, on a preliminary occupancy rate of 55%. The prospectus discussed an ongoing “debt service” by the facility, which they concluded was “some type of mortgage payment” on the facility. The prospectus stated the annual debt service was $228,000.
The projected operating statement for 2012, at an occupancy rate of 75%, showed the facility would make $264,208 in net profits. This translated, if they invested sufficient funds to be a 22% owner, to an annual income of $45,000 to the Fisher’s.
A prompt income was vitally important to the Fisher’s because to achieve the investment, they would both have to cash out their respective 401k plans built over many years of their mutual working careers, and penalties and interest associated with an early cash-out of their 401k plans would cause a substantial tax bill in April 2011. Perkins encouraged them to make as large an investment as possible, originally suggesting $900,000 would achieve a 35% ownership for them. He later convinced them to invest $300,000 cash and execute a $300,000 note (making the investment $600,000). Perkins suggested his attorney prepare the documents, because this was done all the time with his other investors, and they would save on fees.
On June 26, 2010, they met at the Starbucks, to consummate the investment. The “investment documents” were seen by the Fishers for the first time at Starbucks, reviewed a matter “of minutes” and signed. The documents took the form of a real estate lien note (reflecting a total principal of $600,000; $300,000 in cash up front and an additional $300,000 balance, as monies were advanced toward the facility) and a deed of trust (Plaintiff’s Exhibits 2 & 3). The Fishers received an assignment of a limited partnership interest in a limited partnership named: PS Royal Services Group, LP. Either on June 26, 2010, or within a couple of weeks thereafter (to allow the cashing out of their 401k’s), they gave Perkins (a) $75,000 cash, and (b) two checks, totaling $225,000 (Plaintiff’s Exhibits 4 & 5). Perkins requested the 2 checks be made out to an entity called S. Perkins Investment Properties, Inc. (without explanation). This corporation had no apparent relationship to the limited partnership and its name did not appear in the title to the land owned by the Self-Storage facility. Subsequent analysis of the “investment documents,” drafted by Perkins’ attorney, revealed the promissory note had also been payable to that entity (i.e. S. Perkins Investment Properties, Inc.).
After the “investment,” the anticipated prompt cash flow to the young family failed to develop. In fact, the plans to see the Self-Storage facility finished out to open for business never came to fruition. Perkins had assured them with the influx of moneys from their investment, he could open the perimeter unit so the business could generate cash flow and then turn his attention to building out the center climate-controlled area.
What actually followed was 18 months where the Self-Storage facility appeared to be suspended in time, showing no progress and generating no profits to the Fisher family.
Perkins appeared sympathetic and offered to transfer the Fisher’s, without compensation, and without altering their investment in the Self-Storage facility, an interest in one of his ongoing carwashes “as a stopgap measure until he could get the Prosper Storage Facility opened because we were wanting and/or needing an income.” The dearth of income from the facility was also a source of escalating anxiety because the extra penalties and taxes resulting in 2010 from having withdrawn $225,000 of the $300,000 they invested from their respective 401k’s, was “coming home to roost” in April 2011, and they had no cash to satisfy those obligations.
In September 2011, almost 15 months after the Fisher’s investment, Perkins stated in a reply email to Kristi that the difficulties had to do with the changing business environment. But, he assured her the storage facility would’ve been completed but for fluctuations in market valuations and the absence of any desire on the part of the bank to complete the center building (i.e. this left the asset “just hanging.”). The series of emails between Perkins and Kristi left her with the perception that Perkins was “still trying to get this facility opened. He’s still working with the bankers to get this opened.”
As “limited partners,” Kristi and Scott did not have access to the records of the venture, and when they asked specifics, “he became very indignant and defensive.” In all discussions between Perkins and the Fisher’s between their June 2010 investment and the end of September 2011, there had not been a word revealing the property on which the facility was located had been “foreclosed on.”
In July 2011, Perkins executed an assignment of a limited partnership interest to the Fisher’s in a different venture, PS Royal Services Group, Ltd., because, according to Kristi, “he said that because we wanted and/or needed income streamed [sic] more quickly than the Prosper storage unit was able to provide. He was going to move us into the carwash at a lesser percentage until he could get the storage unit opened.” Perkins described it as “a temporary fix until he can get the storage units opened so we could generate some cash flow in our household.”
Time continued to pass without indication of “traction in the storage facility business” they had invested in (“There was no progress, no offers of explanation, nothing.”). After months of sleepless nights and no plausible responses from Perkins, Kristi found herself up at 4:30 AM on the morning of April 3, 2012, making internet searches “trying to make sense of what was happening, and hours of looking on the Internet or anything, something to tell me what was going on with the storage facility, with Mr. Perkins, anything.”
What Kristi discovered was devastating. She testified: “I felt like I had dropped over a cliff.” She learned from public information the facility had gone into foreclosure and been sold on October 5, 2010, less than 100 days after they had become investors. Within days, Kristi went to the courthouse and spent hours examining the details of the case filed by the lender, Capital One, against the Self-Storage facility and the guarantors of the loan, including Perkins, for a deficiency judgment, following the foreclosure sale in October 2010, resulting in a deficiency judgment. She discovered there was another partner in the facility (Charles Sackley) who had filed for personal bankruptcy the first week of July, 2010 (making refinancing all but impossible).
Martin Lehman: Martin J. Lehman, age 60, was deposed May 10, 2017. Lehman is employed with the Dallas firm of Palmer & Manuel, LLP, since 2006. Prior to giving a deposition, Lehman knew nothing about the litigation. Plaintiff’s Exhibit 12 is found Lehman Deposition Exhibit 3. This Exhibit contains approximately 120 pages from the file of Palmer & Manuel.
Lehman was the attorney in litigation filed by his client, Capital One. National Association. The action was a collection case, seeking to recover deficiencies on a promissory note following a foreclosure in October 2010 on real property pledged to secure a Promissory Note dated September 21, 2007.
The Borrower was PS Royal Self Storage, LP, the Texas limited partnership Scott and Kristi Fisher became investors in in June 2010. Another party to the action Lehman had prosecuted on behalf of Capital One was a guarantor of the Note, Stephen F. Perkins. Lehman and his firm conducted the foreclosure on the real property described in the Deed of Trust executed September 21, 2007. Capital One had engaged Lehman and his firm in the spring of 2010.
Lehman issued a Letter dated June 9, 2010, notifying Borrower, PS Royal Self Storage, LP, and the guarantors, Perkins and Sackley, that the Note was in default and demanding payment of the Note. The original Note matured on September 21, 2009 but had been extended until February 21, 2010. Lehman explained because no payment was made he moved forward with foreclosure.
In a 2nd Letter dated June 25, 2010, Lehman included a written Notice of Foreclosure Sale, scheduling a foreclosure sale for the property of PS Royal Self Storage, LP, for August 3, 2010. The Letter was sent both certified and regular mail. Lehman was also acting as the substitute trustee under the Deed of Trust.
In a 3rd Letter, dated August 5, 2010, a 2nd Notice of Foreclosure Sale was enclosed calling for a foreclosure sale on September 7, 2010. In a 4th Letter, dated September 10, 2010, yet another Notice of Foreclosure Sale was issued establishing a foreclosure date of October 5, 2010.
Lehman explained the bank, Capital One, N.A., “bought the property at foreclosure.” It did so using what he described was “a credit bid, that is, a credit against the loan balance” of $1,200,000. As substitute trustee, Lehman executed the Foreclosure Sale Deed dated October 5, 2010, transferring title to the property previously held by PS Royal Self Storage, LP.
In subsequent litigation in early 2011, Lehman alleged the unpaid balance of the collective indebtedness “as of April 5, 2011 is $2,428,227.83.” An individual defendant in that action, Stephen F. Perkins, filed an answer, but the other 2 business entities (i.e. PS Royal Self Storage, LP and GP Royal Self Storage, LLC, its general partner) did not.
In a motion filed April 25, 2011, Lehman advanced both a motion for summary judgment and for default judgment against all defendants, jointly and severally, for the unpaid balance of the Note, with interest and fees. He testified at no point in the litigation did he become aware of “any challenge from the defendants to the foreclosure sale or any of the procedures leading up to the foreclosure sale.”
In a Final Judgment dated May 17, 2011, Capital One recovered, jointly and severally, from all 3 defendants (PS Royal, GP Royal and Perkins) $2,428,227.83, with post-judgment interest and fees. No portion of his file reflected any motions for new trials or appeals; thus, the Judgment became final.
Lehman only had vague recollections of the timing of the call, but he did have a recall Mrs. Fisher contacted him inquiring of the “status of the property,” and he told her, because it was a matter of public record, “yes, we foreclosed.”
When asked whether he had seen in his files or any of the exhibits presented anything “that you believe to be inaccurate or untrustworthy as far as what you recall happened in the lawsuit or in the Final Judgment in this case,” Lehman answered: “No.”
Scott Fisher: Scott Fisher, age 57, was born and raised in Dallas, Texas. He received a degree from UT Arlington in 1982 (in criminal justice science). He was working in specialized access programs at TI when he met Kristi. He never had training, formal or otherwise, in investments or securities and had never been a limited partner before.
Scott corroborated Kristi as to the first meeting that included Robbins and his favorable opinions about the opportunity to invest with Perkins in the Self-Storage facility. He confirmed the details in the “prospectus” were impressive and the cash flow projections by Perkins were attractive (i.e. it “would allow my wife to stay at home with my kids.”) He confirmed Perkins never mentioned issues with the bank prior to their investment. When no cash flow materialized over many months, Perkins offered, as a “temporary fix” to have the Fisher’s receive an interest in one of his carwash businesses.
Scott explained it was Perkins’ idea to expand their investment to $600,000 ($300,000 cash and $300,000 in the form of a note). He had no idea if any monies whatsoever, beyond the $300,000 he and his wife had advanced, were ever placed in the limited partnership as an advance on the $300,000 line of credit note they signed. Like Kristi, he was never concerned the paperwork called for the checks and the note to be payable to an entity (S. Perkins Investment Properties, Inc.) that had, on its face, “no relationship with the business.” Neither he nor Kristi realized the deed of trust they signed as part of the investment was never placed of record and Perkins never revealed his intent to forego placing the deed of trust of record.
While he saw Plaintiffs Exhibit 13 (an email from Perkins dated July 16, 2010 discussing the bankruptcy of one of his other partners, whom he only later learned was Mr. Sackley), the details provided by Perkins in the email revealed only that the partner had been in the home-building business and had gotten “overextended.” No mention was made that the partner had also been a partner in the business he and Kristi had just become investors in. He believes they would have been far more reluctant to invest in the venture had this been disclosed.
In Plaintiff’s Exhibit 16, Scott identified an email he sent to Perkins October 15, 2010, about a “Stop Work Notice” on the door of the office of the facility. While driving by, he noticed a “big red sign,” so he stopped to examine it. It was a Stop Work Order posted on the facility door. After Perkins received the email he and Scott had a conversation, where Perkins said he would “take care of it.” During the conversation, Perkins never mentioned that by the 3rd week of October 2010, the property the facility was located on already “belonged to the bank.”
Scott sent Perkins a 2nd email, dated October 16, 2010 (Plaintiff’s Exhibit 18) inquiring how soon their facility could get up and running. In his reply, Perkins said he was not concerned because he was re-doubling his efforts to “buy down the debt to lower the debt” on the facility, which Scott interpreted as indicating the business had a continuing ongoing relationship with its bank. Omitted from Perkins response in Exhibit 18 was reference to the fact that by October 5, 2010, the Trustee’s Foreclosure Deed on the facility’s property had been executed to the Bank, and the land necessary to the venture’s future was “gone.”
In Plaintiff’s Exhibit 20 (emails between Scott and Perkins of February 27, 2011), Scott informed Perkins of his observations at the facility (i.e. a piece of “trim” was hanging off of the roof, suggesting a safety issue). In Perkins’ reply, on February 27, 2011, he stated: “Scott, thanks for the picture, we have fixed this same trim before. I think for now I will just have it removed for safety.” As before, Perkins failed to mention the foreclosure 4 months previously and/or that if he were to go on the property he might be “a trespasser.”
The Jury’s Verdict. In the Court’s Charge, the Jury found that (a) Perkins committed fraud by intentional misrepresentation against Mr. and Mrs. Fisher in the investment in question (Question 1), (b) a civil conspiracy existed between all 4 named Appellants to “use and/or benefit from” the fraud by Perkins found in Question 1, that was a proximate cause of damage or loss to the Fisher’s (Question 2), (c) Perkins committed fraud by failure to disclose material information to Mr. and Mrs. Fisher in the investment in question (Question 3), (d) a civil conspiracy existed between all 4 named Appellants to “use and/or benefit from” the fraud by failure to disclose material information by Perkins found in Question 3, that was a proximate cause of damage or loss to the Fisher’s (Question 4), (e) Perkins, acting as agent, employee or control person of PS Royal and/or PS Royal Services Group, committed a Texas securities law violation against Mr. and Mrs. Fisher (Question 5), (f) a civil conspiracy existed between all 4 named Appellants to “use and/or benefit from” the securities law violation by Perkins found in Question 5, that was a proximate cause of damage or loss to the Fisher’s (Question 6),), (g) Mr. and Mrs. Fisher sustained out-of-pocket economic damages resulting from the conduct found by the jury in Questions 1, 3 or 5 of $300,000 (Question 7), (h) the reasonable and necessary attorney’s fees of Mr. and Mrs. Fisher in the trial court and throughout the various levels of possible appeal (Question 12), and (i) Mr. and Mrs. Fisher discovered, or in the exercise of reasonable care and diligence should have discovered, that their economic losses found in Question 7 were likely caused by the wrongful conduct of Perkins as found in Question 5, on September 4, 2011 (Question 13).
The Final Judgment of June 29, 2017. On June 29, 2017, without objection from Appellants, Judge Scott Becker took up the Motion for Judgment on the Verdict by Plaintiffs. In that Motion, Appellees elected the statutory remedy provided them, based upon the violation found by the jury in Question 5 of the Texas Securities Act, Article 581-33A (2) of Texas Revised Civil Statutes, including pre-judgment interest from the date of payment (i.e. June 26, 2010) until the date of judgment and attorney’s fees as provided by the Texas Securities Act. Appellees also moved for a judgment against all of the Appellants, jointly and severally, by reason of the finding of the jury in Question 6 that each of the Appellants were members of a civil conspiracy to use and/or benefit from the securities law violation by Perkins.
In its Final Judgment signed June 29, 2017, the Court awarded Appellees all the requested statutory relief under the Texas Securities Act against each of the Appellants, jointly and severally, including pre-judgment interest on their out-of-pocket economic damages of $300,000 from June 26, 2010 until the date of the final judgment, the reasonable and necessary attorney’s fees found by the jury, at the trial court level and at the various levels of possible appeal, post judgment interest and costs of court.
No portion of the appeal by Appellants challenges the pleadings of Appellees, the evidence supporting their claims under the Texas Securities Act, any of the issues in the Court’s Charge, the sufficiency of the evidence to support the answers of the jury under the Texas Securities Act, or assigned error to the action of the trial court in entering its Final Judgment on June 29, 2017, based on the Texas Securities Act.
The Rulings of the Dallas Court of Appeals. The Opinion of the Dallas Court, by Justice Ada Brown, made note of the fact that the Perkins co-conspirators challenged virtually none of the predicate facts or evidence leading to the verdict of the jury in favor of the Fisher spouses in their appeal, and, instead, focused almost entirely on alleged pretrial rulings of Collin County District Judge, Scott Becker, including a refusal to continue the jury trial even though the case had been pending and alarming 1138 days when it was called for trial.
Rejecting the appellate arguments of the Perkins co-conspirators, the Dallas Court affirmed all of the out-of-pocket damages awarded by the jury to the Fisher Family (i.e. $300,000), as well as all of their attorney’s fees incurred in the litigation, from the trial court through the Texas Supreme Court, together with interest and court costs. The Dallas Court also affirmed, without comment, the imposition on each of the Perkins co-conspirators of joint and several vicarious liability for all damages, attorney’s fees and costs, by reason of the finding of the jury that each appealing Perkins defendant had been part of an existing civil conspiracy to make use or benefit of the fraud and security law violations committed by Perkins in the sale of the investment to the Fisher Family.
The Perkins co-conspirators subsequently filed, to avoid joint and several liability for the entirety of the trial court’s judgment, a petition for review to the Texas Supreme Court. On February 21, 2020, the Supreme Court of Texas rejected their efforts, with a single word Order, stating that the petition for review was “Denied.” Several weeks later, the final ruling Dallas Court of Appeals affirming the Jury’s Verdict in favor of the Fisher Family became final.
The Fishers were represented, in the
trial before the jury, in the Dallas Court of Appeals and in the Texas Supreme
Court, by Dallas Attorney, Carl David Adams. Adams is a 1975 cum
laude graduate of the Baylor University School of Law, where he served as
the Notes & Comments Editor on the staff of the Baylor Law Review. Adams is
Board Certified in Civil Trial Law by the Texas Board of Legal Specialization,
and has been published during his litigation career, in numerous legal
 The testimony of Martin Lehman was presented by Videotape, played to the Jury in the Courtroom. The written transcription of the Deposition of witness Lehman’s sworn testimony is found in the Court’s Exhibit 2 (C.E.#2), included in the Reporter’s Record in Volume 10. The Court’s Exhibit 2 contains the written transcription from the Deposition transcribed on May 10, 2017, and includes Pages 4, Line 11 through P.62, Line 2.
 Found at Pages 117 through 132 of the Clerk’s Record,
 Thereby making the filing of this action on May 2, 2014 well within both the four-year statute of limitations for common-law fraud and the three-year statute of limitations for Texas securities law violations.
 And unanimously joined in by Justices Bridges and Nowell, also of the Dallas Court.
 Including an often-cited Baylor Law Review article on the subject of the procedural impact of findings of the existence of and participation by defendants in an intentional civil conspiracy.